Republic of the Philippines

Office of the Ombudsman

Quezon City

To: Hon. Samuel R. Martires, Ombudsman

From: Jerahmeel U. Cuevas
Re: Anomalies on the 30TH SEA Games
Date: 24 December 2019

STATEMENT OF FACTS

1. The 30th SEA Games was held here in the Philippines whereby it was Philippine SEA
Games Organizational Committee (PHISGOC). The hosting however has come under fire
for all the shortcomings and anomalies that had happened.

2. PHISGOC is a private entity performing government functions which also sources most of
its funds from the latter1. Although a private entity, 80 percent of its members come from
the government. Further, the choice of members for this entity is also questionable2.

3. Logistics were poorly handled even with its bloated budget. Issues vary from
transportation, hotel arrangements, and food were noted3.

4. PHISGOC made highly questionable expenditures. From the controversial P50 Million
Cauldron4 to various overpriced sports apparel5.

5. With the conclusion of the 30th SEA games last 11 December 2019 is the hope to address
the issues that plagued this event.

1 https://www.rappler.com/newsbreak/in-depth/245866-sea-games-2019-fund-follows-cayetano-where-he-goes

2 https://www.rappler.com/newsbreak/iq/246004-things-know-sea-games-2019-phisgoc

3 https://www.cnnphilippines.com/seagames/2019/11/24/2019-sea-games-complaints.html

4 https://www.rappler.com/nation/245197-drilon-questions-kaldero-sea-games-2019

5 https://politics.com.ph/panalo-sa-patong-cayetanos-phisgoc-prices-shorts-for-sea-games-athletes-at-p5k-each-socks-at-p2-7k-a-pair/
 ISSUES

I. Questionable status of PHISGOC members.

First and foremost is the question of constitutionality of Alan Peter Cayetano who serves as
the current speaker of the House of Representatives and the head of PHISGOC. Although
PHISGOC registered as private organization, its funds come from the government. It can also be
considered that it is performing sovereign functions comparable to National Centennial
Commission (NCC). In Laurel v. Hon. Desierto6, where former vice president Salvador Laurel
was charged with graft by then-ombudsman Aniano Desierto, involving the former's work as
chairman of the National Centennial Commission (NCC).

Laurel argued that the Ombudsman did not have jurisdiction over him as NCC was not a public
office. In that case, the Supreme Court said: "the NCC performs sovereign functions. It is,
therefore, a public office, and petitioner, as its Chair, is a public officer."
The NCC was to take charge of the country's celebration of the Philippine Centennial. It would
be abolished once celebrations were done. One can draw comparisons about how PHISGOC was
also formed just for the hosting of the 30th SEA Games. Under SEA Games Federation Rules, the
power of the committee "shall cease at the end of the Games."7
As stated in Section 13 Article VI of the Constitution:

“SECTION 13. No Senator or Member of the House of Representatives may hold any other
office or employment in the Government, or any subdivision, agency, or instrumentality thereof,
including government-owned or controlled corporations or their subsidiaries, during his term
without forfeiting his seat. Neither shall he be appointed to any office which may have been created
or the emoluments thereof increased during the term for which he was elected.”

As such Alan Peter Cayetano being head of the PHISGOC is unconstitional. Further, it is also
a violation of Sec. 3(h) of RA 3019 which mentions that:

“(h) Director or indirectly having financing or pecuniary interest in any business, contract or
transaction in connection with which he intervenes or takes part in his official capacity, or in which
he is prohibited by the Constitution or by any law from having any interest.”

6
G.R. No. 145368 April 12, 2002
7
https://www.rappler.com/nation/245968-is-it-constitutional-alan-peter-cayetano-be-phisgoc-chairman
 II. Incompetent handling of the event
Given the exorbitant funding of PHISGOC it is astonishing that handling of the event
shown to our foreign visitors were subpar, as can be seen here:
1. P1.525-billion for Game Services
2. P1.371-billion for Sports
3. P1.326-billion for Venues
4. P566-million for Administration and finance
5. P525-million for Marketing and PR
6. P450-million for Ceremonies
7. P446-million Information technology and telecom
8. P368,680,000 for the Athlete’s Village operations
9. P296-million Broadcast and media
10. P250-million for Security
11. P125.32-million for Volunteers
12. P55-million for International relations and protocol
13. P47.84-million for Accreditation and uniforms
14. P38-million for Human resources
15. P107-thousand for Medical and doping

This breakdown8 of the PHISGOC’s P7.5 Billion fund shows that there is more than
enough to fund the various necessities for the event. The only conclusion is that these funds were
not entirely spent for their intended use. Such is considered as Malversation under Art. 217 of the
Revised Penal Code, Sec. 3(b)(i) of RA 3019 or the Anti-Graft and Corrupt Practices Act, and RA
7080 or the Plunder law. Further, these subpar handling does not follow the professionalism that
should be observed by public officials as enunciated under Sec. 4(b) of RA 6713

8
Supra at 1
 III. Questionable expenditures.
Why spend about P50 million for a single-use “kaldero” (cauldron) when that amount can
be used to build more than 50 classrooms? Senate Minority Leader Franklin Drilon raised that
point in questioning the “extravagant” cost for a 50-meter tall cauldron-type structure for the
Southeast Asian (SEA) Games, during Monday’s deliberations on the budget of the Philippine
Sports Commission (PSC).

The cauldron’s design alone cost P4.4 million; its foundation, P13.4 million; and its
construction, P32 million. An additional P6 million was allotted for “wrist tags,” Drilon said.
This brings the total to an estimated P55 million.9

This thoughtless extravagance sourced from the people’s taxes was defended as a
monument or a work-of-art while the athletes were given subpar treatment (even though it has a
separate extortionate fund) and the various problems of our country would obviously raise
questions of propriety. Hopefully, this would not result in another Wesley So, a chess
grandmaster, who left this country and become a representative of another because he was
denied financial support by the government.

Another issue is the P41,160 price for a set of sportswear from brand Asics at 1,895 sets
9
listed per item as follows:
⁃ Polo shirt: P5,150
⁃ Round neck shirt: P2,480 at 2 pieces per set(P4,960)
⁃ Track jacket: P6,310
⁃ Track pants: P7,400
⁃ Shorts: P5,100
⁃ Socks: P2,700
⁃ Backpack: P3,190
⁃ Running shoes: P3,950
⁃ Cap: P2,400

Cayetano defended these prices mentioning that they are of superior quality and thus
appropriate for their price however it is highly unthinkable that they could have secured cheaper
options with the same quality. After all, these items are not highly technical items wherein it will
production will involve sophisticated procedures. It is highly doubtful that there is no cheaper
option.

9
Supra at 5
 These expenditures constitute violations of Sec. 3(b)(g)(i) of RA 3019 and Art. 217 under
the Revised Penal Code for which they should be held liable.

IV. PHISGOC and Philippine Olympic Committee (POC)

It should also be noted that the PHISGOC and the POC’s function overlap. It would raise
questions on why even PHISGOC was created when the same power, duties, and functions was
already vested in an already existing organization which is the POC. Further, some of
PHISGOC’s members are from the POC as well such as John Patrick Gregorio, the former
secretary-general of the POC or Victorico Vargas, who was the 10th president of the POC. He
resigned in July 2019 – 5 months before the 30th SEA Games – following the controversy
involving the incorporation of PHISGOC to name a few10. This can be construed as a violation
of RA 7080, Sec. 3(c) of RA 3019, and Art. 217 of the Revised Penal Code. Further, it can also
be considered violation under Title I Subtitle B Sec. 52 of EO 292 or the Administrative Code
which states that:

“Section 52. General Liability for Unlawful Expenditures. - Expenditures of government

funds or uses of government property in violation of law or regulations shall be a personal
liability of the official or employee found to be directly responsible therefor.”

RECOMMENDATIONS

I. Preventive suspension for the public officers involved

Under Chapter 7 Sec. 51 of EO 292:

“SEC. 51. Preventive Suspension. — The proper disciplining authority may preventively
suspend any subordinate officer or employee under his authority pending an investigation, if the
charge against such officer or employee involves dishonesty, oppression or grave misconduct, or
neglect in the performance of duty, or if there are reasons to believe that the respondent is guilty
of charges which would warrant his removal from the service. As such, we must course a request
through the Office of the President for the preventive suspension of the people involved. “

10
Supra at 2
 II. Discipline for the erring officers in violation of Code of Conduct and Ethical
Standards for Public Officials and Employees and for violating the law
Administrative cases should be filed against the people involved in the subpar handling
of the event is contrary to the professionalism expected of public officer under Sec. 4(b) RA
6713 which is a ground for disciplinary action under Chapter 7 Sec. 46(b)(8) of EO 292 which
states:
“(b) The following shall be grounds for disciplinary action:

-xxx-
(8) Inefficiency and incompetence in the performance of official duties;”

Further enunciated under the same section are other grounds for disciplinary action when
they committed the various infractions of law.
“(1) Dishonesty;
(4) Misconduct;

(9) Receiving for personal use of a fee, gift or other valuable thing in the course of
official duties or in connection therewith when such fee, gift, or other valuable thing is given by
any person in the hope or expectation of receiving a favor or better treatment than that accorded
other persons, or committing acts punishable under the anti-graft laws;
(10) Conviction of a crime involving moral turpitude;
(12) Violation of existing Civil Service Law and rules or reasonable office regulations;”

III. Filing of criminal cases

Malversation under Art. 217 of the Revised Penal Code as defined:

"ART. 217. Malversation of public funds or property. - Presumption of malversation. -

Any public officer who, by reason of the duties of his office, is accountable for public funds or
property, shall appropriate the same, or shall take or misappropriate or shall consent, through
abandonment or negligence, shall permit any other person to take such public funds or property,
wholly or partially, or shall otherwise be guilty of the misappropriation or malversation of such
funds or property, shall suffer:
-xxx-
"5. The penalty of reclusion temporal in its maximum period, if the amount involved is
more than Four million four hundred thousand pesos (P4,400,000) but does not exceed Eight
million eight hundred thousand pesos (P8,800,000). If the amount exceeds the latter, the penalty
shall be reclusion perpetua.

"In all cases, persons guilty of malversation shall, also suffer the penalty of perpetual
special disqualification and a fine equal to the amount of the funds malversed or equal to the
total value of the property embezzled.

"The failure of a public officer to have duly forthcoming any public funds or property
with which he is chargeable, upon demand by any duly authorized officer, shall be prima facie
evidence that he has put such missing funds or property to personal uses."

Plunder under Section 2 of Republic Act No. 7080 as amended by RA 7659:

“"Sec. 2. Definition of the Crime of Plunder; Penalties. - Any public officer who, by
himself or in connivance with members of his family, relatives by affinity or consanguinity,
business associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten
wealth through a combination or series of overt criminal acts as described in Section 1 (d) hereof
in the aggregate amount or total value of at least Fifty million pesos (P50,000,000.00) shall be
guilty of the crime of plunder and shall be punished by reclusion perpetua to death. Any person
who participated with the said public officer in the commission of an offense contributing to the
crime of plunder shall likewise be punished for such offense. In the imposition of penalties, the
degree of participation and the attendance of mitigating and extenuating circumstances, as
provided by the Revised Penal Code, shall be considered by the court. The court shall declare any
and all ill-gotten wealth and their interests and other incomes and assets including the properties
and shares of stocks derived from the deposit or investment thereof forfeited in favor of the State."

And lastly, violations under Sec. 3(b)(c)(g)(h)(i) of RA 3019 to wit:

“Section 3. Corrupt practices of public officers. In addition to acts or omissions of public
officers already penalized by existing law, the following shall constitute corrupt practices of any
public officer and are hereby declared to be unlawful:
-xxx-

(b) Directly or indirectly requesting or receiving any gift, present, share, percentage, or
benefit, for himself or for any other person, in connection with any contract or transaction
between the Government and any other part, wherein the public officer in his official capacity
has to intervene under the law.

(c) Directly or indirectly requesting or receiving any gift, present or other pecuniary or
material benefit, for himself or for another, from any person for whom the public officer, in any
manner or capacity, has secured or obtained, or will secure or obtain, any Government permit or
license, in consideration for the help given or to be given, without prejudice to Section thirteen of
this Act.
-xxx-

(g) Entering, on behalf of the Government, into any contract or transaction manifestly
and grossly disadvantageous to the same, whether or not the public officer profited or will profit
thereby.
(h) Director or indirectly having financing or pecuniary interest in any business, contract
or transaction in connection with which he intervenes or takes part in his official capacity, or in
which he is prohibited by the Constitution or by any law from having any interest.

(i) Directly or indirectly becoming interested, for personal gain, or having a material
interest in any transaction or act requiring the approval of a board, panel or group of which he is
a member, and which exercises discretion in such approval, even if he votes against the same or
does not participate in the action of the board, committee, panel or group.
Interest for personal gain shall be presumed against those public officers responsible for
the approval of manifestly unlawful, inequitable, or irregular transaction or acts by the board,
panel or group to which they belong.”

Sometime in early 2018, government agencies were drafting the proposed national budget
for 2019. At the time, Cayetano was still DFA secretary and simultaneously PHISGOC chairman.

Even if the DFA has no mandate to help develop sports in the Philippines, P7.5 billion was
inserted in the agency’s budget for the hosting of the 2019 SEA Games.11

Further, as the funding of PHISGOC came from the government, it follows that such
disbursement is for a purpose which however was not properly followed when it was given to this
committee as evidenced by the subpar logistics of the event and the extravagant expenditures.

The P50 million qualifying requirement under the Plunder law is paltry considering the
amount involved in this case which in turn would hold them liable under the same.

There are showings also of violations under RA 3019 where the PHISGOC, making use of
public funds, made transactions manifestly and grossly disadvantageous to the Government by
means of the extravagant expenditures. These acts manifest the personal interest to gain which
qualify them as graft and corrupt practices under the said law

11
Supra at 1
 IV. Expulsion of Alan Peter Cayetano from the House of Representatives

Under Art. 6 Sec.16(3) of the Constitution:

“(3) Each House may determine the rules of its proceedings, punish its Members for
disorderly behavior, and, with the concurrence of two-thirds of all its Members, suspend or expel
a Member. A penalty of suspension, when imposed, shall not exceed sixty days.”

For violations of the law, it is respectfully recommended that we lobby for his expulsion
in the House of Representatives.
 Republic of the Philippines
Office of the Ombudsman
Quezon City

To: Hon. Samuel R. Martires, Ombudsman

From: Jerahmeel U. Cuevas
Re: Water Concessionaire Fiasco
Date: 24 December 2019

STATEMENT OF FACTS

1. In the mid-1990s under the Ramos administration, Metro Manila had rotational water
shortages. The Metropolitan Waterworks and Sewerage System (MWSS) simply could
not keep up with the demand of an overpopulated Metro Manila.
2. The MWSS was only able to cover less than 70% of the entire Metro Manila. Non-
revenue water or the volume of water lost due to leakages was very high. Supply was
intermittent and lasted less than 16 hours a day.
3. Then-president Fidel Ramos believed that privatization of the MWSS was the best way to
improve services and at the same time ease pressure on the government to handle the
daunting task.1
4. These issues emphasized that the government through the MWSS was not competent to
handle the water woes plaguing Metro Manila.
5. Alongside the issues mentioned above:
a. Public-Private Partnership (PPP) then was very new. There were only a handful
of contracts to serve as precedents in water or even other sectors, and thus the structure
was perceived to be high risk considering especially regulatory uncertainty. The
Philippines did not have a clear regulatory regime on water and thus had to develop an
innovative “regulation by contract” scheme. A big part of the risk mitigation aspects of
this depended on a performance undertaking by the Republic as represented by the
Finance Secretary, and the provision of international arbitration for dispute resolution.

1
https://www.rappler.com/business/246526-how-manila-water-maynilad-got-concession-agreements
 b. The Philippines’ credit rating was below investment grade, interest rates on
treasury bills were at double digits, our government debt to GDP and budget deficits to
GDP were much higher, as was the external debt to GDP, the current account in deficit,
while foreign reserve coverage was only two months’ worth of goods and services versus
eight today.
c. The MWSS then was a mess, very inefficient, there was intermittent water
supply, very high water leakage and theft (Non-Revenue Water over 60%). It was over-
staffed but had low productivity, was highly indebted, and with high technical risks —
nobody knew the condition of the pipes, so this added to the risk premium.2

6. On January 23, 1997, the competition to win the concession agreements began with 4
bidders. They were:

International Water (composed of United Utilities of the United Kingdom and Bechtel
Corporation of the United States) and Ayala Corporation
Lyonnaise des Eaux (France) and Benpres Holdings
Compagnie Generale des Eaux (France) and Aboitiz Equity Ventures
Anglian Water International (United Kingdom) and Metro Pacific Corporation

Ayala and Lopez-led Benpres both won the bidding and formed Manila Water and Maynilad
Water Services, respectively. They not only got contracts, they also absorbed the MWSS' debts.

Manila Water took the East Zone, which covers 23 cities and municipalities. They are
Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, most parts of Quezon City,
portions of Manila, and 14 areas in the province of Rizal.

Maynilad got hold of the West Zone, which covers 17 cities and municipalities. It covers
most of Manila, areas in Quezon City, areas in Makati, Caloocan, Pasay, Parañaque, Las Piñas,
Muntinlupa, Valenzuela, Navotas, and Malabon, as well as Bacoor, Imus, Kawit, Noveleta, and
Rosario, which are in Cavite province.3

7. These were the factors considered during that time when the concession was granted to
the winning bid in order to entice them into entering in a PPP with the Government. As such, it
contained highly advantageous provisions in favor of the private entity.

8. The privatization of water in the Philippines is considered one of the most successful
public-private partnerships in the world by various organizations.

2
https://www.bworldonline.com/water-woes-just-the-facts/
3
Supra at 1
 9. The concession agreements were supposed to end by 2022, but were extended by the
Arroyo administration to 2037.

10. Despite stellar achievements, the issue of how the companies increased their rates
continued to haunt them over the years.

At one point, former MWSS acting chief regulator Emmanuel Caparas accused the
companies of being overly extravagant.

"Marami pong expenses [ng mga water companies] dito na nakita namin na hindi dapat ma-
allow. For example, mga donations...charitable contributions, ang mga gastos para pampa-
basketball, pampa-sports clinic, mga bagay na ganoon," Caparas said in a GMA News Online
article in 2013.

(There are a lot of expenses by these water companies that we should not allow. For example,
donations, charitable contributions, expenses for basketball, sports clinics, things like that.)

These allegations eventually led to a bitter spat between the companies and regulators,
leading all the way to international arbitration.

To make matters worse, the same water crisis that Manila Water and Maynilad pledged to
resolve more than two decades ago is back once more.

The Angat Dam, their main water source, is no longer enough to supply the needs of over 12
million Metro Manila residents.4
11. December 2019, MWSS revoked the extension of the concession agreement with
companies Maynilad Water Services and Manila Water. The concession agreement will now end
in 2022, the original expiration date, instead of 2037. The extension was approved in 2009,
during the Arroyo administration.

12. Both Manila Water and Maynilad said they have waived the results of their separate
arbitral rulings which granted them P7.4 billion and P3.4 billion, respectively. Both
concessionaires also said they would discuss deferring the implementation of water rate hikes
originally set for January 20205.

4
Id.
5
https://www.rappler.com/business/246902-mwss-cancels-manila-water-maynilad-concession-agreement-extension
 ISSUES

I. Whether the contract contains onerous provisions

II. The premature extension of the deal made by the Arroyo administration
III. The liabilities
During the time when the said concession was agreed upon, it is understandable why the
contract was in favor of the concessionaires. The Government did not have the means to handle
the ordeal which resulted in a water crisis back then. It would require the private sector to invest
extremely large sums into a venture unknown at that time. As such, the obvious course of action
was to entice the private sector into investing in a PPP with the Government through favorable
deals.

12 years after all these, the Arroyo administration extended the concession mid-way its lifespan
for reasons yet unknown. However, this would imply that the said administration would have had
reviewed the contract. During that time, the water crisis has been long gone. In consideration of
public interest, the Arroyo administration should have renegotiated these “onerous” provisions but
instead extended the same as it is until 2037. This act can be considered as a violation Sec. 3(e)(g)
of RA 3019 and possibly RA 7080 depending on the investigation.

The P10 billion arbitration win of the concessionaires speak of the validity of the provisions
although both companies have conceded and said they will no longer demand payment. However,
even though legal, if public interest was indeed the reason for the extension, the obvious course of
action would have to be renegotiation on the provisions which was not done by the Arroyo
administration.

Maynilad and Manila Water has its faults too. These companies reneged on the obligations set
forth in the contract which resulted with the recent water shortages and a Supreme Court ruling
against them for violations of the Clean Water Act6.

The signatories from when the contract was made during the Ramos administration cannot be
faulted for their acts as it was a necessity at that time. However, as mentioned above, allowing
such to continue when there is a duty to protect public interest and the circumstances that gave rise
to that necessity was long gone would certainly lead the person in charge of such liable.

6
https://news.abs-cbn.com/news/08/06/19/sc-fines-maynilad-manila-water-mwss-for-ph-clean-water-act-violations
 RECOMMENDATIONS
I. Filing of criminal cases against the members of the MWSS and others
The acts mentioned above violate Sec. 3(e)(g) and (i) depending on the investigation of RA
3019, to wit:

“Section 3. Corrupt practices of public officers. In addition to acts or omissions of public

officers already penalized by existing law, the following shall constitute corrupt practices of any
public officer and are hereby declared to be unlawful:
-xxx-

(e) Causing any undue injury to any party, including the Government, or giving any private
party any unwarranted benefits, advantage or preference in the discharge of his official
administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and employees of offices or
government corporations charged with the grant of licenses or permits or other concessions.
-xxx-

(g) Entering, on behalf of the Government, into any contract or transaction manifestly and
grossly disadvantageous to the same, whether or not the public officer profited or will profit
thereby.
-xxx-

(i) Directly or indirectly becoming interested, for personal gain, or having a material interest
in any transaction or act requiring the approval of a board, panel or group of which he is a member,
and which exercises discretion in such approval, even if he votes against the same or does not
participate in the action of the board, committee, panel or group.

Interest for personal gain shall be presumed against those public officers responsible for the
approval of manifestly unlawful, inequitable, or irregular transaction or acts by the board, panel or
group to which they belong.”

Although not entirely entering into a contract, what the Arroyo administration violates the
spirit of the law. By granting an extension to a contract with unfavorable provision against the
Government, they have caused undue injury to the same.

If it is found that such extension was made for personal gain, these people would also be liable
under Sec.3(i) of RA3019 mentioned above and possibly RA 7080 or the Plunder Law:
 "Sec. 2. Definition of the Crime of Plunder; Penalties. - Any public officer who, by himself or
in connivance with members of his family, relatives by affinity or consanguinity, business
associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth
through a combination or series of overt criminal acts as described in Section 1 (d) hereof in the
aggregate amount or total value of at least Fifty million pesos (P50,000,000.00) shall be guilty of
the crime of plunder and shall be punished by reclusion perpetua to death. Any person who
participated with the said public officer in the commission of an offense contributing to the crime
of plunder shall likewise be punished for such offense. In the imposition of penalties, the degree
of participation and the attendance of mitigating and extenuating circumstances, as provided by
the Revised Penal Code, shall be considered by the court. The court shall declare any and all ill-
gotten wealth and their interests and other incomes and assets including the properties and shares
of stocks derived from the deposit or investment thereof forfeited in favor of the State."

Further, although Maynilad and Manila Water are private entities, if it is found out that such
extension was in connivance done for personal gain, they can also be held liable underSec. 4(b) of
RA 3019 mentions:

“(b) It shall be unlawful for any person knowingly to induce or cause any public official to
commit any of the offenses defined in Section 3 hereof.”
And Sec. 9 or RA 3019:

“Section 9. Penalties for violations. (a) Any public officer or private person committing any of
the unlawful acts or omissions enumerated in Sections 3, 4, 5 and 6 of this Act shall be punished
with imprisonment for not less than one year nor more than ten years, perpetual disqualification
from public office, and confiscation or forfeiture in favor of the Government of any prohibited
interest and unexplained wealth manifestly out of proportion to his salary and other lawful
income…”